Question

# Maxima Corp. uses a standard cost system with machine-hours as the activity base for both variable...

Maxima Corp. uses a standard cost system with machine-hours as the activity base for both variable and fixed manufacturing overhead (VMOH & FMOH). The following information relates to production for last year:

 Variable Fixed Total budgeted overhead (at the denominator level of activity) \$14,000 ? Total applied overhead \$15,400 \$28,600 Total actual overhead \$15,700 \$31,800

The actual machine-hours incurred were 2,300. VMOH Efficiency Variance was \$700 Unfavorable.

What was Maxima's FMOH Volume Variance?

 Variable Overhead applied = standard rate * actual hours \$15400 =standard rate * 2300 hours Standard Rate =6.6957 Budgeted hours = Budgeted Overhead /* standard rate =\$14000/6.6957 =2091 hours Standard Rate for fixed overhead = \$28600/2300 =\$12.43478 Budgeted Fixed overhead =\$12.43478*2091 =\$26000 Fixed overhead volume variance = Overhead Incurred - Budgeted Overhead =\$26000-28600 =\$2600 ( Favorable)

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